Upping the Ante in Next-Generation Risk Solutions

New Rules, Higher Stakes
by Cubillas Ding, October 3, 2011
Vendor Reviews
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

Recent mergers and acquisitions in the risk solutions market could accelerate the way firms architect, integrate, and deliver solutions.

Technology investments in risk systems are undergoing a sea change. In the last decade, the solutions market has been shaped by a risk-centric regulatory agenda which has aggressive deadlines and onerous scope. At the same time, the new reality is that financial institutions and investment firms need to deal with rapidly changing and “transferable” risks, investor sensitivity, herd trading behaviors, and significant market movements. Volatile energy and commodity prices, sovereign debt, political unrest, and natural disasters like earthquakes all underscore how the pace, scale, and impact of risks are increasing.

In this report, Upping the Ante in Next-Generation Risk Solutions: New Rules, Higher Stakes, Celent examines developments in the risk solution vendor market. In recent years, M&A activity has accelerated due to robust growth in demand, while competitors have raised their game.

Established providers have begun to focus on the risk management space in a concerted manner, one case in point being IBM’s announcement that it is acquiring Algorithmics. Celent believes that deals like these create the potential for a disruptive acceleration in the way firms architect, integrate, and deliver solutions to address risk management challenges.

“As firms and governments chart strategies to tackle unresolved issues from the financial crisis and the threat of an impending one, the stakes are higher than ever,” says Cubillas Ding, Research Director at Celent and author of the report. “The nature of buying risk solutions is changing. This new normal means that the traditional incongruity between market-facing units, risk, treasury, and finance functions will no longer suffice. Risk taking, risk control, and risk mitigation activities will need to be more orchestrated.”

This report brings to the forefront the relationship between recent developments in the risk solution market and the eventual playing out of onerous financial services industry reforms and risk management practices. It analyzes consolidation dynamics and technology innovations that will shape risk technology requirements, and examines what they will mean for vendors and financial institutions in the coming years.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Risk Technology Investment Drivers: A New Playing Field

3

State of the Market

7

 

The Big Boys Are Joining the Fray

7

 

When Consolidation Dynamics Play Out

8

Upping the Ante in a New Vendor Landscape

12

 

Acquisition Is the Name of the Game …

12

 

… to Operationalize risk Practices and Address the “Risk and Business” Disconnect

13

 

The Shakers and Movers: Solution Footprint

15

 

Who Are the Specialist Risk Players Left?

16

Where to Next?

18

Leveraging Celent’s Expertise

20

 

Support for Financial Institutions

20

 

Support for Vendors

20

Related Celent Research

21

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